30 November 2016

Maersk tightens its ship recycling procedures

Maersk is introducing contractual steps to ensure that its sales contracts include a strong financial incentive for ship recycling to be carried out responsibly.

In the wave of discussions on Maersk entering the ship recycling sector in Alang, Maersk has faced criticism for its handling of two independent cases related to ship recycling. One related to the FPSO North Sea Producer that was sent by its new owner to a ship recycling yard in Bangladesh, despite Maersk stipulating in the contract that the production unit, at the end of its lifetime, was to be recycled according to the Hong Kong Convention.

The other case relates to 14 chartered-in Starflotte ships whose contracts Maersk wanted to end ahead of time in 2014. In the final agreement with the owner, Maersk incentivised recycling at the best price, which effectively means recycling at sub-standard yards, which is what the owner chose to do when the vessels were returned.

In the latter case, Maersk has publicly acknowledged, and regrets that it indirectly incentivised the owner to recycle at sub-standard yards.

Group response
As outlined by the Head of the Sustainability Council, Claus V. Hemmingsen, the Group has responded to these cases by tightening its procedures:

"We have actively participated in, and worked directly with the yards in Alang, India, to improve conditions there and to influence the industry as a whole. Therefore, it is regrettable that in spite of these initiatives there are examples of how we have pushed in the opposite direction of our own policy. In the future, we will ensure that our sales contracts contain a very strong incentive for ship recycling to be carried out responsibly,” says Claus V. Hemmingsen.

Minimising the financial incentive
In 2009, the Group introduced a responsible recycling policy and expressed its support for the Hong Kong Convention. Procedures were further tightened in September 2016, in order to minimise the financial incentive for buyers to recycle irresponsibly.

The new contract terms are based on the value of the vessel at the time of sale. If the value is low (less than 25% of the highest recycling price), Maersk will not divest but will recycle the vessel according to its standards.

If the value is higher (25-40% above the highest recycling price), the new owner will be required to operate the vessel for a further two years or to recycle in accordance with Maersk's standards. When the vessel has been operating on behalf of others beyond a period of 24 months, Maersk can no longer take on this extended responsibility.

If the value is high (more than 40% above the highest recycling price), the vessel can be resold without restrictions, as there is no financial incentive for the buyer to recycle, at this point in time.

“With these adjustments, Maersk expands the responsibilities that the Group takes to ensure responsible ship recycling. The tightened policy further clarifies the fact that Maersk will not enter into contractual agreements that encourage the new owner to find the highest price for steel in the future,” says Claus V. Hemmingsen and underlines:

“We stand by our commitment and intention to continue working with and developing the facilities at the Alang yards just as we continue to support global initiatives to ensure equal international requirements and conditions. Only global regulation will ensure a definitive stop to the critical conditions that we see today.”

Facts on cases

North Sea Producer
The FPSO North Sea Producer operated in the UK North Sea from 1997–2015 and was owned by the North Sea Production Company Limited (NSPC), an independent British company owned 50/50 by Maersk and Odebrecht, a Brazilian company.

Following contract termination, the North Sea Producer was sold and transferred to a buyer in April 2016 on an "as is, where is" basis, whereby the buyer took over operational and legal responsibility for the unit.
In August 2016, Maersk was made aware of the fact that the North Sea Producer had been sent to a recycling yard in Bangladesh, where conditions do not meet the requirements of the Hong Kong Convention. Maersk had contractually bound the buyer to the Hong Kong Convention but the buyer chose to violate the contract.

An internal legal study has concluded that neither Maersk nor NSPC can prevent the recycling from taking place or impose a financial legal claim against the buyer.

The Maersk Group has subsequently broken all commercial relations with the buyer.

In 2005, Maersk Line acquired P&O Nedlloyd and with this company, a chartering agreement relating to 14 container ships, called Starflotte.
Maersk Line later estimated that the ships did not meet its requirements for the remaining contract period and negotiated an agreement with the owners regarding the termination of the rental agreement and recycling of the ships, in return for compensation.

The steel price the owner could obtain for recycling the vessels was included in the calculation of the commercial transactions between Maersk Line and the ships’ owner at the termination of the agreement.

The vessels were subsequently recycled at sub-standard yards when their contracts ended in 2013.

Source: Maersk. 23 November 2016

Maersk supports responsible ship recycling:

As a minimum, yards that Maersk collaborates with must be certified according to the Hong Kong Convention.

Maersk supports a global agreement on responsible ship recycling. Since 2009, when Maersk introduced a responsible recycling policy and expressed its support for the UN’s Hong Kong Convention, Maersk has put great effort into pushing for its universal ratification. The convention was negotiated in the International Maritime Organization (IMO) and defines a set of global minimum standards on safety and environmental issues related to ship recycling.

Maersk supports recycling yards in Alang, India, that demonstrate a willingness to change, and their efforts have already led to significant progress. As a minimum, yards that Maersk collaborates with must be certified according to the Hong Kong Convention. Since sending two vessels to the Shree Ram yard at Alang for the first time in May this year, Maersk has witnessed significant progress in several areas.

In the yard, 70% of the workers have received intensive safety training and instructions from the independent British assessment services provider, Lloyds Register Quality Assurance, and other organisations. The remaining 30%, who perform less dangerous tasks, have also received safety training specially targeted towards their tasks.

Other examples of the progress achieved are:
As opposed to practices used elsewhere in the local area, the environmental recycling plan outlined by said convention means that the majority of a vessel is dismantled on a surface whereby there is no contact between ship parts and the surrounding sand or water.

Use of appropriate personal protective equipment is available and required.
All workers are paid the minimum wage plus 200 % in overtime payment and they have a contract—neither of which are otherwise practiced by the industry in the local area.

For the vast majority of the shipyard’s employees, housing conditions have been significantly upgraded and the yard is in the process of improving the housing conditions of the remaining employees.

Maersk’s intention to have vessels recycled in Alang, India, and its concurrent decision to sell two container vessels to one of the leading ship recyclers in the area has raised public concerns and triggered controversy. Its ambition is to change an industry.

Annette Stube, Head of Group Sustainability says that when Maersk decided to collaborate with ship recycling yards in India everyone was fully aware of the risk of being criticised as the yards were not yet observing the regulations fully.

“We can document the main improvements that have already been achieved and we now see that the recycling yards' engagement in the plan has led to others following suit. When we begin negotiations on the recycling of the next vessels, we will invite a number of other yards in Alang that, like Shree Ram, already follow the Hong Kong Convention and will commit to meeting our standards,” Stube says, adding that four shipyards have announced that they are ready and have already initiated new investments in improvements impacting hundreds of workers.

Annette Stube underlines that the Group complied with standards of openly communicating to media and NGOs prior to initiating the recycling activities:

“Instead of waiting on the sideline we have taken action and the results we have achieved in six months are far more comprehensive and far-reaching than those achieved during the seven years of waiting for a global agreement.”

Source: Maersk. 23 November 2016

26 November 2016

Grief-stricken families of Gadani tragedy's victims await disbursement of financial aid:

Grief-stricken families of Gadani tragedy's victims await disbursement of financial aid

GADANI: Heirs of victims of Gadani ship-breaking yard explosion are still waiting for the disbursement of financial aid despite the fact that eighteen days have passed since the tragic incident occurred.

Only breadwinner of the family of eight living in hut at Goth Abdul Karim, 18-years-old Sanaullah, had aslo fallen prey to deadly blaze that swept through Gadani ship-breaking yard but grief-stricken family of Sanaullah has not been provided with any financial aid.

Among missing workers, two belonged to Gadani’s Saleh Goth.

Being disappointed from traders of ship-yard, residents of Goth Saleh have asked the government for financial aid at earliest. According to the government, 22 workers lost their lives in this incident.

Meanwhile, the Association of Builders and Developers of Pakistan (ABAD)  has urged that instead of stopping work at Gadani Ship-Breaking Yards, proper safety measures be ensured at these yards.

Source: the nation. 19 November 2016

London event to address safe and efficient scrapping of ships

United Kingdom: The 4th Ship Recycling Congress organised by ACI, set to take place on January 25-26 next year in London, will highlight practical experiences with the aim of educating the shipping sector about how to profit from the safe and efficient scrapping of end-of-life vessels.

During the two-day conference, the European Commission's list of approved ship recycling facilities will be discussed in detail, highlighting the effects that it will have on Europe's ship recycling market.

Other hot topics to be tackled will include: methods of increasing ship recycling profitability despite low steel prices; and latest 'green' ship technologies that promote more efficient recycling procedures.

Additionally, the event will follow up on potential solutions to safety issues and health risks to which workers may be exposed outside the EU while promoting a fresh insight into technological and practical systems for hazardous waste tracking.

Source: recycling international. 21 November 2016

Steel makers jack up prices after Gadani fire incident:

KARACHI: The price of steel bars has gone up by Rs8,000-Rs10,000 per tonne after the fire incident at the Gadani ship-breaking yard last month that claimed at least 19 lives.
Traders in Sarya Market said the price of regular-quality steel bar, which was available at Rs56,000-Rs57,000 prior to the Gadani incident, has now surged to Rs68,000 per tonne. They said the price of steel of a better quality is now Rs74,000 per tonne compared to the earlier rate of Rs68,000 per tonne.

The market is facing a shortage at a time when demand for steel bar is high, they said, adding that manufacturers of steel bars also face a dearth of raw material.

However, chairman Association of Builders and Developers (Abad) Mohsin Sheikhani said the builders use two types of steel bars. One of the qualities now costs Rs 69,000 as compared to Rs 57,000 while another quality is now available at Rs 74,000 as compared to Rs 68,000 per tonne. The increase will raise the construction cost that will ultimately be borne by property buyers.

The government has ordered a halt in activities at the Gadani ship-breaking yard by imposing Section 144 instead of ensuring safety measures for the industry that is the main source of raw material for steel manufacturers.

He said builders are finding it hard to continue their projects due to the shortage of steel in the local market. Most builders will have to shut down their ongoing projects due to increasing steel prices in case they decide against raising the rates of their apartments or housing units, he noted.

The Abad chief said almost 20,000 people connected with the Gadani ship-breaking yard have lost their jobs. He demanded that the government should immediately lift Section 144 and allow ship-breakers to begin their work.

Pakistan’s iron and steel scrap import slightly fell to 992,546 tonnes worth $257 million in July-October against 1m tonnes of imports costing $311m in the same period a year ago.

According to the annual report of the State Bank of Pakistan (SBP), the overall steel production witnessed a contraction of 9.3 per cent in 2015-16 compared to growth of 35.4pc in the preceding year.

The suspension of Pakistan Steel’s operations overshadowed the notable performance of private-sector steel manufacturers. The steel industry faced two key challenges in the year that constrained domestic private manufacturers from effectively utilising their capacity expansions.

Firstly, the liquidity crisis at Pakistan Steel brought its operations to a complete standstill July 2015 onwards. Pakistan Steel contributes 10-15pc of the total steel production in the country. It is the sole producer of pig iron, which is used as an input for making various steel products.

Hence, the suspension of Pakistan Steel’s operations forced steel manufacturers in the private sector to rely on imported pig iron, the report said.

Secondly, the unprecedented decline in international steel prices, coupled with the influx of cheap Chinese steel under the Free Trade Agreement (FTA), squeezed the profit margins of domestic firms. In fact, low-cost steel products from China have posed a threat to many steel manufacturers around the globe.

Hence, imports of steel scrap and steel products increased 35.6pc and 30pc, respectively, in 2015-16. These imports posted extraordinary growth despite the imposition of anti-dumping duties on the import of cold-rolled coils and sheets from China and Ukraine, the SBP report said.

International Steel doubled its capacity with the installation of a second galvanising plant with a capacity of 250,000 tonnes in 2015.

Mughal Steel enhanced its melting capacity to 72,250 tonnes per annum from 48,000 tonnes and rerolling capacity to 229,688 tonnes from 187,500 tonnes per annum in 2015. Amreli Steel witnessed capacity addition in 2014-15 and expects to double its capacity in 2016-17 and 2017-18, the report said.

Pig iron had 4pc share in the overall steel production in 2014-15, which fell to zero in 2015-16. As many as 57 local steel makers argue that Chinese manufacturers have resorted to dumping their steel products in other countries by relying on government subsidies, tariff concessions through FTAs and marginal cost pricing mechanisms.

The SBP report said countries such as Bangladesh, Mexico, Brazil, United States and India have countered this threat by imposing countervailing duties, regulatory duties and other non-tariff barriers to protect their local steel industries.

Appropriate tariff barriers are not in place to protect Pakistan’s steel industry because of concessions given through the FTA and incorrect declaration of non-alloy steel goods as alloy steel. Members of the Group of Seven (G7), an informal bloc of industrialised nations, agreed to take steps to tackle a global glut in steel that many blame on excess production by Chinese producers of steel products used in construction and cars. These import duties, which were imposed in January 2016, varied in the range of 8.3pc to 19pc.

Source: 23 November 2016